An American Buys the Canadiens - Montreal Canadiens may be purchased by businessman George Gillett, Jr - Brief Article

IN EARLY FEBRUARY, AFTER MORE than six months on the sales block, the storied Montreal Canadiens finally found a willing buyer. Sixty-two-year-old George Gillett Jr., an entrepreneur originally from Wisconsin, bought a controlling interest in the franchise and 100% of the Molson Centre from Molson, Canada's largest brewery.

Under the terms of the deal, Gillett win purchase the Molson Centre and 80.1% of the Canadiens for a total of approximately $185 million. Molson will retain 19.9% of the team. On the surface, it would seem as though Gillett got a great deal. Last year, Forbes valued the team at $191 million and Molson built the $190 million arena just five years ago. But the Canadiens have struggled mightily lately, both on and off the ice. The Molson Centre, for example, pays three times more in taxes than all U.S. arenas combined. As a result, Molson--which is a public company--has taken losses of $7 to $8 million a year recently, and said that selling the team and arena was in the best interests of its shareholders.

Gillett, who, pending NHL Board of Governors approval, will become the team's first non-Canadian owner in its 91-season existence, has a history of sports investments. Most recently, he had attempted to purchase the Colorado Avalanche and Florida Panthers, but was outbid on both occasions. In the `60s he was a part-owner and business manager of the NFL's Miami Dolphins, and he also once owned and operated the Harlem Globetrotters. He has since started one of the U.S.'s top meat packing firms and owns ski resorts in Colorado and a string of TV stations.

While many Canadians were not enthralled with the idea of an American owning the historic franchise, one of Molson's conditions was that Gillett keep the team in Montreal. In addition, Molson, which had owned the Canadiens since 1978, will pay $100 million over the next 20 years to remain the team's principal sponsor.

Commissioner Gary Bettman gave his annual state-of-the-league address at this year's All-Star Game in Denver. While he painted a fairly positive picture for the NHL, he also warned that trouble could surface when the current collective bargaining agreement expires in late 2004.

"This game is getting more and more marketing, more promotion, more exposure than it has ever gotten in its history," said the commissioner. "When I took over the league eight years ago, the sponsor promotional spending was about $25 million. This year it is about $375 million. We have more games on television. We are more widely viewed. We are better covered than we have ever been. That will continue."

In spite of the league's growth, or perhaps because of it, the NHL's financial picture is not as good. Salaries have increased at a pace far ahead of team and league revenues, and Canadian teams continue to struggle with a weak exchange rate and higher taxes. In addition, large-market teams have resources that most other teams cannot imagine.

"In the long term, we will have an economic system and framework that will enable all of our teams to be economically viable and competitive," Bettman said. "I want all of our fans, no matter who you root for, to believe on day one of the season that you have just as good a chance as winning the Stanley Cup as anyone else. I believe in--and I am committed to--the strong presence in Canada that our six teams give us."

Bettman also addressed the issues of revenue sharing and a salary cap, the latter of which will be a point of contention with the players association. "We need to have a system that gives us the certainty and stability we need from an economic standpoint to make sure all of our teams are competitive, and since we have no intention of moving our teams, it is going to need to account for not only small markets, but also the Canadian clubs.

"I think it is important that our fans know, particularly our fans in small markets and our fans in Canada, that to the extent we have an economic imbalance, it will be addressed long-term, because we have no choice."

Pittsburgh Penguins center/owner Mario Lemieux, who has a unique perspective from both sides of the negotiating table, said: "There's got to be an opportunity for the owners to make money. I can sense that some of the owners are getting tired of [losing money]. I just think we need to take a step back and find a way to make it work for both sides."

Now that the Penguins have been boosted by Lemiuex's return, with the average home attendance exceeding capacity since he came back, both the franchise and Bettman agree that Pittsburgh's Mellon Arena is functionally obsolete. "They need a new arena," said Bettman at the All-Star Game. "And the sooner, the better."

Mellon Arena, built in 1961, is the league's oldest building. It was originally built for opera performances. It lacks the large number of club seats and luxury suites that are prime revenue generators for franchises, and the Penguins are in the bottom third of the NHL in arena income. Bettman and Lemieux have discussed a timetable for a new facility, which may be unveiled by Lemieux later this year.

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